Hilton Nairobi, Source - Ruslik0, CC BY-SA 4.0
The Covid 19 pandemics impact on Kenya's tourism, like many other countries, was devastating. It was particularly painful to Kenya's tourism industry as it was the final blow that led to the exit of two iconic hotels - Intercontinental and Hilton Hotels. The two hotels located at the heart of Nairobi central business district were put up in the 1960's (Intercontinental, 1967) and (Hilton, 1969), with a combined room count of 676 as part of the governments efforts to boost tourism and cement itself as a top safari destination. From the time of their development, the country has lived through 4 Presidents, and myriad of changes to the cities skyline. It is therefore not an exaggeration to conclude that the two hotels 53 year history played a big part in Kenya's tourism industry's development up-till their exit - two years apart (Intercontinental, 2020 and Hilton in 2022).
Whats to become of the buildings now that the hotel is closed? Will it become, as some in jest suggested - another coffee shop?
The answer to this question lies in understanding the general nature of the hotel life, referred to here as its investment cycle. This is process through which hotels are conceptualized, built, operate and change hands.
The Hotel Investment Cycle
For the purpose of this article, we will consider hotel investing in the context of a new development, there are five main stages in a hotel investment life cycle.
Stage 1: Concept Stage
At this stage, the developer is in possession or has identified a piece of land to develop. The decision to build a hotel, though driven by the ownership, is guided by real estate consultants who determine what the highest and best use of the land is. A competent development team consisting of architects, structural engineers, electrical engineers interior designers and quantity surveyors would help bring out the investors idea to life. Whilst this teams input is important, a hospitality consultant would help the investor refine the concept through feasibility studies that would help the concept find product market fit and a return on investment. A good feasibility study would thus guide the development team toward building a viable hotel asset.
Considerations during the concept stage would include if the hotel would be designed around existing hotel brands and how the hotel would be operated.
Stage 2: Design Stage
With the concept in place, the actual design of the hotel would follow. The design would, if the investors intend to operate the hotel as a brand, be dictated in large part by the brand they select. In cases where the hotel asset is independent, the development team, lead by the architect and interior designer would take the lead. Design inspiration would come from various sources, often a guided by a theme. It is not uncommon to find lodges designed around the national parks they are in.
The guiding principles around design would be to balance aesthetics, functionality and work flow based on ratios that guide space allocation between back of house staff areas, food and beverage space and guest spaces. These ratios affect workflow and guest circulation which in turn have a direct impact on the profitability of the hotel asset.
Stage 3: Construction Stage
At this stage, the concept and design have been thought through as to whether to brand or not and who would operate the hotel. It is at this point, with relative clarity of the end use market, that the construction commences. It is good to keep in mind that changes may occur due to new information reaching the investor or a change in strategy. To keep in mind too is that major changes will become harder to effect further along the process and may lead to cost over-runs and/or lengthy construction extensions that in turn negatively affect the development feasibility.
Stage 4: Pre-Opening Stage
At this stage, the hotel structure now complete, it transformed into an operational hotel. The sourcing of the furniture and fixtures may have been completed or is in the process of being complete. The finishing touches that breathe life into the structure include; procurement of operating supplies and equipment, installation of information and communication systems, setting up financial systems including bank account set up, procuring of licenses and permits, hiring and training of staff and creation of business and marketing plans and establishing relationship with distribution partners (online and offline travel agents, tour operators and destination marketing companies).
This is the stage when the hotel makes first contact with the world it will operate in. Having a go to market strategy at this point is important as it will help the management team establish the market response to the hotel asset as early as possible, allowing them to pivot marketing strategies to find product market fit.
Stage 5: Management and Exit Stages
This is the most visible part of the hotel investment cycle as both brick and motor and service standards are in play as an operational hotel. This is the stage through which the hotel investor begins to recoup their investment. The expertise of the management team is a key determiner of success requiring a keen eye on the part of the investor to ensure talent is identified and nurtured to elevate the guest experience, control costs and build the hotel brand which itself would lead to better bottom lines for the investor.
A hotel investor can periodically conduct valuations of his/her investment to keep track of the growth of value and relate this to their initial investment to assess return.
In conclusion, every hotel goes through a cycle of introduction, growth and decline. It is upon the investor to gauge their goals against the hotels performance to figure out what to do at each stage to meet their goals. As to the fate of the two iconic hotel that once commanded Nairobi's skyline for 53 years - they will most probably change hands to new investors. The prospects of what comes next is an open and exciting question. It is reasonable to infer that whoever it is that invests will have a big legacy to live up. They will play a part in the gentrification of Nairobis' skyline and rejuvenating its hotel industry too.
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Worth a read
1. A guide to buying and selling hotels from Hospitality insights.
2. 10 myths of hospitality development in Africa by W Hospitality.